Three things to know about budget deal

The first thing that must be said about the budget compromise reached by Gov. Brian Sandoval and the Nevada Legislature is this: There are no “new” taxes.

June 3, 2011 - 1:01 am

CARSON CITY — The first thing that must be said about the budget compromise reached by Gov. Brian Sandoval and the Nevada Legislature is this: There are no "new" taxes.

To put it another way: No person will pay a penny more in taxes on July 1, the start of the new fiscal year, than he or she paid on June 30, the close of the current one.

In the wake of the budget compromise announced Wednesday, some have said that because the package of sales, car registration, business license and payroll taxes would have expired, extending them somehow constitutes a "new" tax. But that’s simply and obviously not the case.

In fact, some of those taxes will actually be eliminated. The deal reached by Democratic and Republican leaders will end the payroll tax on the first $250,000 in wages, wiping out the tax entirely for about 70 percent of the businesses in the state.

And the state’s overall budget will fall (by $500 million) compared to the 2009-11 budget, the first time that’s ever happened, Sandoval said.

Now, there’s no getting around the fact that extending the "sunset" taxes is a violation of Sandoval’s no-tax promise. He specifically and repeatedly said he’d not extend those taxes, and most Republicans said the same thing.

It was only when he was forced to confront a potential $657 million, last-minute budget shortfall 10 days before the scheduled close of the session that Sandoval reversed course.

The second thing to know about the deal is that it represents a true compromise, in which each side gave up something it desperately wanted.

Democrats gave up the higher spending they added onto Sandoval’s original budget. While the final spending plan is higher than Sandoval proposed, it’s not nearly as much as Democrats wanted.

Not only that, but two taxes (that were actually "new") — a sales tax on services and a margins tax on business profits — died quick deaths.

Not only that, but Democrats had to surrender on reforms including modifications of teacher tenure, collective bargaining and the elimination of the Public Employees’ Benefits Program health-insurance subsidy for new employees.

Republicans were forced to come off their promise not to vote for taxes of any kind, which has already engendered the ire of the right. Within hours of the deal’s announcement, right-leaning groups were condemning it, condemnations that could echo until Election Day.

Republicans also didn’t get as much as they wanted in the way of reforms, including the total elimination of binding arbitration in collective bargaining or more significant reforms in construction defect litigation.

And, of course, Sandoval had to give on the central promise of his campaign. Although the governor was criticized for the rapidity with which he came off his promise, the alternative is that he would have been forced to cut an already-parsimonious budget even further.

The final thing to remember about the budget deal is that– outside of demonstrating Sandoval’s ability to get engaged in the process and forge a compromise — it has almost no application to the future.

The Legislature failed, once again, to significantly broaden the state’s tax base. In part, that had to do with the late introduction of the Democrats’ tax plans, which weren’t unveiled until May. In part, it had to do with entrenched opposition to taxes.

But as ever, the opportunity for a grand debate on what the state ought to do (and not do) and how those things are paid for gave way to a march to a particular budget number in order to get an on-time departure from Carson City.

Steve Sebelius is a Review-Journal political columnist, and author of the blog SlashPolitics.com. Follow him on Twitter at www.Twitter.com/SteveSebelius or reach him at (702) 387-5276 or ssebelius@ reviewjournal.com.